Bankruptcy and the Death of a Spouse


Nobody in Oak Park wants to think about the prospect of a spouse’s death and how it will affect their lives emotionally, psychologically, and also financially. However, some couples need to consider such issues due to health concerns, or because they are thinking about filing for bankruptcy. We want to address some of the ways in which a spouse’s death can affect personal bankruptcy proceedings. For example, if a couple has thousands of dollars of debt that has been accrued by only one spouse, does that debt go away upon the spouse’s death? If a couple files for Chapter 13 bankruptcy together and one of the spouses passes away, how does the court handle that Chapter 13 repayment plan?
We will discuss a couple of different situations that can arise when married couples accumulate debt and file for bankruptcy.
Marital Debt and the Consumer Bankruptcy Option
A recent article in the Los Angeles Times posed this question: What happens when one spouse has a terminal illness, and the couple has tens of thousands of dollars in credit card debt? In such a scenario, does it make more sense for the couple to file for bankruptcy together, or, since the ill spouse accumulated most of the credit card debt, will the debt go away after that spouse’s death?
Generally speaking, debts that are incurred during a marriage are debts of the marriage (or marital property). As such, just because one spouse amassed the debt, it will likely be treated as debt that belongs to the marriage. In particular, many couples have credit card accounts on which they are both listed, making clear that both spouses are responsible for the debt. As such, failing to pay on the type of credit card debt mentioned above would likely put the surviving spouse in a financially precarious situation. If both spouses are elderly, it is possible that the only other assets are exempt—such as Social Security benefits and IRA benefits. However, many older couples own homes and other significant assets that could be at risk if the credit card company were to file a claim.
In other words, it is almost never a good idea for one spouse to assume that he or she is not responsible for the other spouse’s debts. Bankruptcy could be an option, but the couple should speak with a bankruptcy lawyer about options.
Chapter 13 Bankruptcy for Married Couples and the Death of a Spouse
In a different scenario, what happens when a married couple files for Chapter 13 bankruptcy together and one of the spouses dies unexpectedly? There are a number of different issues to consider here.
First, the death of a spouse may mean that the surviving spouse cannot complete the Chapter 13 plan on his or her own. At the same time, it is important for couples filing for bankruptcy together to know that the death of a spouse does not mean that the case will simply be dismissed. Sometimes the court will determine that the surviving spouse can continue to make payments on the original Chapter 13 plan as it stands. In other situations, the surviving spouse may be able to modify the Chapter 13 plan. In yet other cases still, the surviving spouse may be able to request a hardship discharge.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about your bankruptcy case? An experienced Oak Park bankruptcy attorney can assist you. Contact the Emerson Law Firm for more information.
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